Small listed companies have performed significantly worse under Labour governments over the past 40 years because of major policy changes, a report says.

The report, produced by Massey University economics and finance senior lecturer Dr Chris Malone and associate professor Hamish Anderson, looked at the results of about 500 NZX listed companies since 1972.

"We have attempted to ask the question why that has happened and it does appear to be related to policy reform."

Companies were classified as large or small by splitting the sample at the median capitalisation.

Small firms had average monthly returns of about 0.7 per cent under Labour and between 1.4 per cent and 1.8 per cent under National.

Monthly returns for large listed firms were only slightly better when National was in power, he said.

Malone also said a four-year election term would save the New Zealand economy billions of dollars because small firms struggled to cope with constantly changing regulation.

"Four years instead of three in the political cycle would give government more time to phase in policy instead of rushing reform through.

"This could give smaller firms breathing space to adapt and adjust to the new environment"

The paper, titled "Firm Size and the Political Cycle Premium", has been accepted for publication in the international journal Managerial Finance.

Since 1972 there had been 13 governments, made up of six Labour governments and seven National governments.

The main reasons for poor performance in small firms during Labour governments included market under-performance, periods of falling inflation, harsh default-risk and credit conditions and the introduction of deregulation in 1984 that opened up firms to increased foreign competition and exchange rate pressures.

Notable features were the two Labour governments of the 1980s under Prime Minister David Lange.

In the first term from 1984 to 1987 the mean returns were amongst the highest in the sample but in the second term the smaller firms had a mean monthly return of minus 7.2 per cent.

Labour still had a tendency to introduce reform which affected business, he said, pointing to Labour's proposed energy sector reforms.

Reform was something that needed to be extremely well thought through, he said. "Economic reform can have severe consequences in financial markets. The speed and coordination of the reform can have implications as well."

Labour's economic development spokesman Grant Robertson said in a written response that under Labour the economy grew more strongly.